Swap users win staggered delays in Dodd-Frank reporting rules

Energy and manufacturing companies won delays in Dodd-Frank Act requirements to report derivatives trades they use to hedge business risks.

The so-called end users, who trade as clients of banks including JPMorgan Chase & Co. and Citigroup Inc., need the delay to test data systems, the Commodity Futures Trading Commission said in a press release yesterday. The rules were to take effect today.

Users of interest-rate and credit swaps will have until July 1 to comply with the reporting rule, according to the CFTC statement. The deadline for users of equity, foreign exchange and other commodity swaps was extended until Aug. 19. Non- financial counterparties gained an extension to Oct. 31 for certain reporting requirements for all swap asset classes.

“I am troubled by the arbitrary and ad-hoc manner in which this relief was provided,” CFTC Commissioner Scott O’Malia, a Republican, said in a statement. “The application of date, product and participant distinctions makes compliance and implementation confusing for the end users.”

The CFTC and Securities and Exchange Commission are implementing derivatives provisions of Dodd-Frank, the 2010 regulatory overhaul, after largely unsupervised trades helped fuel the 2008 credit crisis. New rules planned for the $639 trillion global swaps market require that trade information be reported to so-called swap data repositories that function as central record-keepers.

The Commercial Energy Working Group, an alliance of companies that weren’t identified individually, requested a six- month delay through lawyers at Sutherland Asbill & Brennan LLP in a March 1 letter to the CFTC.

“Of all the different groups that would be responsible for reporting, they are probably the least prepared,” Brenda Boultwood, vice president of industry solutions at Palo Alto, California-based MetricStream, which helps clients manage regulatory compliance, said in a telephone interview before the delay was announced.

Lobbying groups representing Barclays Plc, JPMorgan and Goldman Sachs Group Inc. have also urged that the CFTC delay the reporting rules for their clients. In a March 28 letter to the CFTC, the International Swaps and Derivatives Association Inc. and Financial Services Roundtable said bank clients need a delay because they lack the resources to comply with the rules.